Does Coca-Cola Look Attractive After Recent Weakness in Share Price?

If you are thinking about what to do with shares of Coca-Cola, you are not alone. In the world of blue chip stocks, Coca-Cola always manages to spark debate: is it still a good buy, or has it lost its fizz? The stock closed recently at $66.21, and its performance has been a mix of subtle dips and long-term gains. Over the past week, returns have been flat at 0.0%. Zoom out a bit, though, and the last month’s 5.6% decline grabs your attention. Even so, Coca-Cola still sports a 7.1% return year-to-date and a robust five-year return of 56.3%, showing that patient investors have done well over the long run, despite a short-term loss of 4.9% in the past year.

Large consumer staples like Coca-Cola often see periods of slower growth when markets rotate toward riskier assets, or as inflation and interest rates move. Recently, these broader market shifts have weighed on shares, but Coca-Cola’s proven ability to adapt keeps it in the spotlight for value seekers.

Here is where things get interesting: when we run Coca-Cola through a six-point valuation checklist, the company comes out ahead in 4 out of 6 criteria. That means a value score of 4, which puts it firmly in “undervalued” territory according to standard metrics. But valuation, like investing itself, has layers. Let’s dig into how Coca-Cola stacks up across the main valuation approaches, and why there may be an even sharper way to look at its true worth by the end of this article.

Coca-Cola delivered -4.9% returns over the last year. See how this stacks up to the rest of the Beverage industry.

Approach 1: Coca-Cola Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) valuation model estimates a company’s fair value by projecting its future cash flows and then discounting those figures back to today at an appropriate rate. This approach focuses on Coca-Cola’s ability to generate cash well into the future, rather than relying solely on current profits or sales.

According to the latest data, Coca-Cola posted a last twelve months Free Cash Flow (FCF) of approximately -$635 Million, reflecting the impact of working capital changes and short-term investments. However, analyst projections anticipate a strong rebound, with FCF expected to reach $13.39 Billion by the end of 2027. Over the next decade, estimates extrapolated by Simply Wall St suggest continued upward momentum in Coca-Cola’s annual FCF, supported by its global scale and resilient business model.

The DCF model calculates Coca-Cola’s intrinsic value at $93.40 per share. With shares recently trading at $66.21, this means the stock is currently priced at a 29.1% discount to its estimated fair value. Based on these projections, Coca-Cola appears meaningfully undervalued using the DCF approach.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Coca-Cola.

Our Discounted Cash Flow (DCF) analysis suggests Coca-Cola is undervalued by 29.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Coca-Cola Price vs Earnings (P/E Ratio)

The Price-to-Earnings (P/E) ratio is a widely used valuation metric for established, profitable companies like Coca-Cola. It provides an at-a-glance sense of how much investors are willing to pay for each dollar of earnings. When companies produce steady profits, the P/E ratio becomes a reliable gauge of market sentiment and future growth expectations.

Investors often debate what makes a "normal" or "fair" P/E ratio. Typically, faster-growing and less risky companies command higher P/E multiples, while slower growth or more risk leads to lower benchmarks. For Coca-Cola, the current P/E is 23.4x, which is below the average for its global beverage peers at 25.5x, but notably above the industry average of 17.6x.

To get a more tailored benchmark, Simply Wall St uses the "Fair Ratio," which analyzes attributes like Coca-Cola’s earnings growth prospects, profit margins, industry, market cap, and unique risk profile. The Fair Ratio for Coca-Cola is set at 26.0x. Unlike a simple industry average or peer comparison, this proprietary figure provides a measure that accounts for the company’s specific qualities and not just its sector.

Comparing the Fair Ratio (26.0x) to the current P/E (23.4x), Coca-Cola’s shares appear undervalued using this perspective. Its price is actually lower than what would be expected given the business’s fundamentals. This adds another point to the case that Coca-Cola remains attractively valued, even if the market is feeling cautious right now.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Coca-Cola Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives, a dynamic and user-friendly tool that allows you to connect your view of a company to the numbers underpinning its future.

A Narrative is simply your investment story for a company like Coca-Cola, where you set out your assumptions about its growth, margins, and fair value, turning the usual numbers and forecasts into a logical storyline you can actually believe in.

By linking the company’s outlook and business strategy to your own financial projections and resulting valuation, Narratives make it easy to see why a stock may be overvalued or undervalued right now, rather than just following market headlines.

Best of all, Narratives are available directly on Simply Wall St’s Community page, where millions of investors share, update, and discuss their views as new information becomes available. Your Narrative automatically evolves with breaking news, earnings, or market trends.

Comparing your Narrative’s fair value to the current share price helps you quickly decide when to buy, hold, or sell, making your investing process more transparent and personalized.

For example, while some investors see Coca-Cola’s future fair value as high as $78.70, others are much more cautious at $54.61. This means you can benchmark your story against the broadest range of real investor perspectives.

For Coca-Cola, here are previews of two leading Coca-Cola Narratives:

🐂 Coca-Cola Bull Case

Fair Value: $71.00

Current Price vs Fair Value: 6.7% undervalued

Revenue Growth Projection: 6.64%

• Coca-Cola's global brand strength and recession-tested business model provide reliable returns. The company is supported by over six decades of dividend increases and lower-than-market volatility.
• Shifting consumer trends toward health and wellness present both risk and opportunity. Coca-Cola is innovating with digital transformation and direct-to-consumer channels and is aiming to grow in emerging markets.
• Risks include foreign exchange headwinds, changing regulatory landscapes, and sustainability criticism. The overall thesis sees the stock as fairly valued with solid long-term prospects.

🐻 Coca-Cola Bear Case

Fair Value: $54.61

Current Price vs Fair Value: 21.2% overvalued

Revenue Growth Projection: 5.5%

• Coca-Cola's recent earnings improvements are driven by non-recurring factors and margin expansion that are unlikely to persist. Core soft drink markets remain mature and under health-related pressure.
• The company's attempts at diversification beyond carbonated soft drinks have yielded slow progress. Most revenues remain tied to slow-growing or declining segments.
• Valuation is viewed as backward-looking and too high. There is potential for P/E contraction if earnings growth normalizes, and risks such as major tax disputes and high payout ratios could weigh further on the stock’s outlook.

Do you think there's more to the story for Coca-Cola? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com